Business: Theory and Practice 11(3): 222-237, doi: 10.3846/btp.2010.25
Peculiarities of Individuals’ Financial Behaviour
expand article infoDaiva Jurevičienė, Eglė Gausienė
Open Access
Abstract

The article deals with different interpretations of peculiarities of individuals’ financial behaviour. The adaptability of Efficient Market Hypothesis (rational and irrational investors’ behaviour and their influence on market efficiency) and Behavioural Finance (by separating into two building blocks: Cognitive Biases and Limits of Arbitrage) to individuals’ financial behaviour interpretation is summarized and compared as well as basic theories defining individuals’ financial behaviour: Absolute Income Hypotheses (John M. Keynes), Life Cycle Hypothesis (Franco Modigliani and Richard Brumberg), Permanent Income Hypothesis (Milton Friedman) and individuals’ financial motives are named and described. After accomplishment of investigation of personal finance management habits in Lithuania it is determined, that Lithuanians managing their finances tend to seek short-term goals and do not care about saving for retirement, do not employ all existing investment instruments.

Keywords
personal finance; financial behaviour; Efficient Market Hypothesis; Behavioural Finance; Absolute Income Hypotheses; Life Cycle Hypothesis; Permanent Income Hypothesis; financial motives